Pursuant to the federal Clean Air Act (CAA) Major facilities in the northeastern counties of NJ (Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, and Union) will be required to pay nonattainment penalty fees for calendar year 2008 emissions which exceed 80% of baseline emissions. This fee is required because the NY/NJ Metropolitan Air Quality Control Region did not attain the 125 ppb 1 hour ozone National Ambient Air Quality Standard (NAAQS) by the attainment date in 2007. This fee will continue each year until that NAAQS is attained. An EPA guidance memo dated March 21, 2008, from Bill Harnett (http://www.state.nj.us/dep/aqpp/ebm.pdf), defines a 10 year period to determine baseline emissions and provides the penalty fee amount of $5000 + annual CPI adjustments (starting with 1991), which translates to $7,950.55 per ton in 2008. EPA staff is in the process of developing guidance which may provide flexibility on how this fe!
e is paid and is expected to be released in draft form in early 2009.

Either the states or the federal government will collect these fees. New Jersey may need legislation or rules to implement this part of the CAA. The earliest the fees would be collected in NJ is with the 2010 emission fees, due by January 31, 2010, which is based on calendar year 2008 emissions. The 2008 Emission Statements are due by May 15, 2009, and will be the basis for the annual emission fee invoices sent out in December 2009. Based on this list of emission statements, NJDEP will calculate and advise each affected company of the potential section 185 emission penalty fees. Under EPA guidance yet to be finalized, there may be several ways of meeting this fee obligation. We will share this guidance with you and discuss the options when it is available.

In the meantime, we recommend that each major facility in this region compare its recent emissions of NOx and VOC to the emissions in the baseline period using the procedures in the EPA March 21, 2008 memo. If your current emissions are greater than 80% of the baseline, we recommend you take measures to reduce emissions to avoid this fee in future years should we continue to not attain the 1 hour ozone NAAQS.

Progress is being made on ozone reductions, and we expect the 1 hour ozone NAAQS to be attained with the implementation of measures in the VOC and NOx rules that have been or are being adopted this year. However, there is uncertainty about the attainment year given the phase in period for these rules and continued transport of ozone from other states. Hence, these nonattainment penalty fees could be effective for several years.